SEC boosts market oversight

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Steve Dinneen

US financial watchdogs will overhaul their regulatory power in light of the mysterious “flash crash” on the day of the UK election.

The Securities and Exchange Commission will ramp up its market surveillance by tracking stock orders across all equity markets in real time.

SEC Commissioner Luis Aguilar said: “It is shocking that the SEC does not have its own direct access to market data. Most Americans assume that the SEC already has these tools and is constantly monitoring the market.” Hindered by their inability to easily see the entire marketplace, the SEC and other regulators are still analysing the market swoon that saw the Dow Jones industrial average plunge some 700 points in minutes before recovering.

For nearly three weeks, regulators have been analysing more than 19bn shares of stock that were traded on 6 May. They still have been unable to pinpoint the cause of the free fall.

SEC chairman Mary Schapiro said analysing the events has been substantially more challenging and time consuming because no standardised, automated system exists to collect data across the various trading venues, products and market participants.

The consolidated audit trail, proposed unanimously by the five SEC commissioners, “would allow us to rapidly reconstruct trading activity and to quickly analyse both suspicious trading behaviour and unusual market events,” Schapiro said at the same meeting.